How companies are (or should be) structured like cities.
Tony Hsieh talks about his Internet juggernaut Zappos in the same way that urban planners talk about cities. In fact, the language is uncanny. He believes the best ideas – and the best form of productivity – come from "collisions," from employees caroming ideas off one another in the serendipity of constant casual contact.
This is only achievable through density, with desks pushed close together in the office, or – in the case of Hsieh’s ambitious plans to leverage the new Zappos headquarters to remake downtown Las Vegas – with company employees and community members colliding into each other on the street. For the kind of "collisionable" density he’s looking for in downtown Vegas around his company, he figures the neglected area (not to be confused with the Vegas Strip) needs at least 100 residents per acre.
His idea perfectly transposes the old urban planning trope of dense cities as idea factories onto office culture (Jane Jacobs, though, might find his 100 residents per acre prescription a little low). So did he borrow his thinking about corporate culture from cities?
"I actually haven’t read Jane Jacobs," Hsieh admitted this week, after speaking at The Atlantic’s Startup City: Miami conference. "I’ve heard her name many times."
His evolution in thinking, he says, comes more from his earlier days as a party planner. Close one bar in the corner of a room for example, he says, and you eliminate congestion points and enable people to better flow through a party. The challenge is all about creating circulation and serendipity.
"In some ways," Hsieh says of both his company and his broader Las Vegas undertaking (they are now, essentially, inseparable), "I’m thinking of it more as one big party."
The typical office has about 200 or 300 square feet of space per employee. When Zappos moves into its new headquarters in the former Las Vegas City Hall in about six months, Hsieh is aiming for something closer to 100 square feet per employee. He’s also planning to decommission a skywalk into the building to force people to enter through (and collide with) the street.
In the context of offices, this kind of density bucks conventional wisdom. Most companies think employees will perform best, or at least be happiest, if as many of them as possible can have their own spacious corner office (with closable door!). This thinking has even influenced the architecture of office towers.
"That’s analogous to people wanting to live in the suburbs and live in a big house,” Hsieh says. "And what they don’t realize is that they end up trading two hours of commute time for more time with friends or relaxing or whatever."
In an office space, this analogy means that employees with their own corner offices wind up losing out on opportunities to talk to each other. And that’s where the really good stuff of successful companies comes from, in Hsieh’s thinking. Unabashedly, he says Zappos has always prioritized collisions over convenience, which might sound like a strange way to sell the company to potential recruits.
But Hsieh threads his explanation of all of this with references to research. Studies have shown, he says, that when someone sits twice as far from you in an office environment, you don’t see that person half as often. “You see them half as often squared!” he says, or a quarter as often.
The same idea, he adds, extends to downtowns. And this is why he and some fellow investors are pouring $350 million into an overlooked part of Vegas (the money is separate from Zappos) to support companies and institutions that will be equally invested in the idea of colliding with one another.
"The research has shown that every time the size of a city doubles, productivity or innovation per resident increases by 15 percent," Hsieh says. “But when companies get bigger, productivity per employee generally goes down. So we want to figure out how do you actually avoid the fate that most companies have and instead create this interesting hybrid between corporation and community and city so that you actually get productivity increases both for the company as well as the community and city?"
Yet more research, he adds, has shown that most innovation happens as a result of an idea from one industry being applied to another. And so he is equally invested in having his Zappos employees bump into the owner of a jazz bar down the street as he is in having them bump into each other in the hallway.
He thinks about all of downtown Vegas as a "collision bowl," where the value of a given resident derives from his or her potential "collisionable community hours." Figure a given resident (many of them his employees or entrepreneurs he has invested in) contributes about 1,000 collisionable community hours a year. Multiple that by 100 residents per acre, and you’ve got 100,000 collisionable community hours per acre per year. Slice that down to real estate-speak, and he’s looking at 2.3 collisionable hours per square foot per year.
"I don’t know what that means, but I like to give it to our real estate partners to freak them out," Hsieh says. In theory, though, everyone benefits from the idea he's getting at, whether in an office setting or on the street. "What we like to say about downtown Vegas is that downtown Vegas will make you smarter. Which is probably the last thing you’d expect anyone to say about Las Vegas."